Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts have been paid.

Understanding your qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt. Recurring debt includes auto loans, child support and credit card payments.

For example:

A 28/36 qualifying ratio

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our superb Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be thrilled to pre-qualify you to determine how much you can afford.

BeneGroup, Inc. can walk you through the pitfalls of getting a mortgage. Call us: 4083956018.